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In my 21 years of startups, I had my ideas “stolen” twice. See part one for the first time it happened. This time it was serious.

As a reminder, this post is not legal advice, it’s not even advice. It’s just a story about what happened to me.

Customer DevelopmentWe were starting Epiphany, my last company. I was out and about in Silicon Valley doing what I would now call Customer Discovery trying to understand how marketing departments in large corporations worked. The initial hypothesis for Epiphany (from my much smarter partner Ben) was that as departments in the enterprise (manufacturing, finance, customer support sales) became automated, the marketing department would eventually get its turn.

I remember presenting our ideas for Marketing Automation to one VP of Marketing in a large Silicon Valley company. His enthusiastic response was, “This will revolutionize marketing departments!” He continued: “I’d like to convince my boss so our company can be your first customer.” I should have been suspicious when he said, “I’d like to take a copy of your presentation to show him.” Caught up in the enthusiasm of hearing what a great idea we had, I violated one of my cardinal rules, and left him a hard copy.

Fast ForwardFast forward nine months. After talking to tons of customers and almost as many VC’s, we got Epiphany funded as a company that was going to automate Marketing Departments. After a ton of unreturned phone calls, I had written off the enthusiastic VP of Marketing who wanted to show my slides to his boss and moved on with building our company.

By now we had found a few customers and learned a lot more about the market from them and other prospects. Our business model changed as we realized that to become a large company, we needed to automate more than just a few marketers. As we were out looking for our Series B round, our company had gotten the attention of “name of big VC firm here” who wanted a play in enterprise software.

Are These Your Slides?During the due-diligence process, I sat down with one of the partners who pulled out a set of slides and asked me: ”Have you seen these?” I quickly leafed through them and replied, “Sure they’re our original slides. Why?” He said, “Look again.” They had all my words from a year ago, but hey wait a minute, there’s someone else’s logo on my slides?! What’s going on? He said, “That’s what we’re trying to figure out. These guys just got funded, and they sound a lot like you guys.” Luckily I had the original slides and could prove who came first. Still the fact was a competitor had raised money using our idea and our slide deck.

And who was this competitor? The VP of Marketing who a year earlier had wanted a hard copy of our slides. He was now CEO of a new company in our market.

I felt like I had just been kicked in the stomach.

Disbelief, Anger, Resignation and AcceptanceMy cofounders and I went through the stages of disbelief, anger, resignation and acceptance. Here was a competitor who had appropriated our idea and gotten funded. (Welcome to the Internet bubble.) There was lots of venting as we talked about lawsuits and issuing nasty press releases.

We consciously didn’t ask potential customers to sign a Non-Disclosure Agreement (NDA). In Customer Discovery we were learning as much from them as they did from us. And we figured that unless litigation was going to be our business strategy, NDA’s would have inhibited the back-and-forth that made us smarter. We concluded that, at least for us in this market, an NDA would be a bigger impediment than asset. Now we started asking ourselves, “Did we make a mistake? Would have getting a signed confidentially agreement deterred this person?” On further reflection, (and their track record since) not in the least. But that still left us with a problem. What should we do about this competitor copying our strategy?

Finally, we concluded, “You can’t drive forward by looking in the rear-view mirror.”

Our competitor was executing on hypotheses we had developed 9 months ago, and their strategy remained static. We on the other hand, had moved on. We had discovered detailed information about what customers really needed and wanted and turned our original hypotheses into facts. We had validated our new assumptions by a set of orders, and we had pivoted on our business model. Our original idea had been nothing more than an untested set of hypotheses. Truth be told, we were no longer the company in those stolen slides.

While the common wisdom said that our success was going to be determined by which company executed better, the common wisdom was wrong. In a startup success isn’t about just execution, it’s how well we could take our original hypothesis and learn, discover, iterateand execute.

Never Get Even, Get AheadWith a set of orders from brand name customers, we had growing confidence that we had achieved product/market fit. We were within three months of formally announcing our company and products at a major industry trade show. We made sure our competitor knew this. In fact, we made sure they knew what day at the show we were going to announce. Just as we predicted, they picked the day before us for their announcement in an effort to preempt our company launch with theirs. We made sure they heard how shocked and upset we were that they were going to beat us to an announcement in our market.

Our competitor announced on a Monday solidifying their position in the small market we had abandoned because we realized it was unprofitable and would not scale.

We announced the next day, positioned as a player in a much larger and broader market with new positioning, strategy and customers.

Our copycat competitor was now publicly locked into a company and product strategy that was obsolete and untenable.

Over the next two years we left them in the dust.

———

While how you iterate and execute your idea is more important than the idea itself, there are parts of your intellectual property a startup does need to protect. More on this in the next post.

Lessons Learned

Your business concept is not a company. Lots of people have ideas. Typically they are just a set of untested hypotheses.

Successful companies are about the learning, discovery, iteration on your initial ideas. If someone can do a better job iterating hypotheses and executing than you can, you deserve to fail.

No business plan survives first contact with customers

The real value is finding the product/market fit. That’s not found in a set of slides.

We’re in midst of finding the best service/market harmony at Victus Media. Perfect timing on sharing this pearl Steve. For us stealing a slide deck would serve a competitor very little.

For our tech project (and likely others in our field) the value is in accurately predicting platforms and information channels in the next 6months-1 year. This is more challengine than it appears, and method of insulation is supporting varied input channels.

Kudos for rolling with the punches and coming out on top, your response was much more measured than mine would have been, dictated in part by the realities of the situation. Frankly, the VP of the competitor deserves to be outed, though you’ve moved on fine and are above that.

I really enjoyed this post. As I tell my students, “ideas are cheap, execution is expensive”. You proved this adage to be true once again.

I generally avoid handing over my slides as well, for two reasons: (i) confidentiality and, (ii) because I do not want someone else to try to “tell my story”. I know that no one can deliver my pitch with the same passion and intensity as me or my team.

Agreed on not handing over slides. One alternative I have used is to have a PDF of a sanitized version of the slides ready to go as a leave behind or email afterwards so you can keep the really good stuff out. However, there are still ways to get around this with screen capture or fast note taking. My company is in the contract automation business so we have made our NDA available for free on our demo page so people can use it for free if they think it works for them. It is web-based, fast and easy and soon to may be available on the iPhone.

Wow – my take away from this is that you are very slow at getting funding for your idea. No offense, I’m in the same boat. But, someone was able to take your presentation and get funded with it while you were “lolly-gaging around” (on that front). How is it these people with no clue can go from idea to funding so quickly and why can’t you and I get a piece of THAT action? What are we doing wrong!?!?!

It’s hard to tell whether “this” means the time you are talking about in the same paragraph (which was the one covered in the previous article), or the one covered in other paragraphs, the one in this article.

as the author says, what matters is that the idea evolved over time. actually, having an idea stolen/copied provides the same kind of advantage than evolution over time. while launching the idea on the market, the competitor draws new information to the idea’s original owner. prices, clients, positioning, and so on are valuable data for a new service idea. and the market remains largely open to a set of actors, there is room for everybody, and it is even an advantage for a new idea not to be sold by only one company on the market because the market can trust it with more confidence. my conclusion is that letting others copy your idea brings more benefits than disadvantages, even if the original conceptor’s ego is suffering a little. making use of non disclosure agreement is both expensive and counter productive. let the world know about your secret idea and follow up what’s happening, learn from the competition, improve your service, compare yourself to the competition, make it better, and you’ll see it’s far much easier to convince clients to adopt your idea if there is already competition.

Would you mind posting the evolution of slides? (I am assuming they are no longer as confidential).

This would be a great learning tool for guys like us, how you went through the process and where you end up. If you do, I will put my time to decompose those slides, try to recover what has changed, where you did change the assumptions etc.

If you think, this is not possible, I would still hope to get the slides privately, I promise to keep them confidential.

[…] be put to use making your concept a moving target, while your larger competitor puts icing on the version of your idea you’ve long left behind. This is the pivot, a crucial tactical maneuver for the lean startup […]

Great post! I am currently a young entreprenuer working on my first web-based start-up and I am using the Customer Development model Ash uses.

One thing recently came across my disucssions with my team about “getting out of the building” and it was about getting our idea stolen. I strongly feel it is important and having this fear can’t be helpful in anyway. In order to alleviate the fears of my colleagues, I plan on showing this entry. But one thing just occurred to me, it has been 5 years since you last wrote your book. How prevalent would you say this process is? How likely is it that your potential competitor would not only take your initial idea and slides but also perform the same iterative tasks you would be doing?

Very encouraging. I asked you about this issue at your UCLA talk yesterday and there was no time to discuss in depth. Glad to have found this on your blog. It gave me a lot to think about and gave me the confidence to move forward without the nagging thoughts about disclosure, NDAs, etc… Thank you.

Loved the post. People who say that copy is the sincerest form of flattery, haven’t been copied… Oh man, it hurts.

I remember that during the First Internet Bubble, I was working as a product manager for a start-up and sweat a lot to figure out a legal, easy, appealing way to provide a specific financial service online. No one had done that so far, I was alone in the dark.

We launched and it was a instant success. I was so happy.

Next day our main competitor launched the same product. It was not similar, it was a copy and I could prove. In one of the steps, they used an image I created, using my own documents. It was my personal data in enemy hands!

I would love to have a happy ending as yours, but it was not the case. I think during a bubble is not always the best team who wins, it is the fastest (sometimes trading ethics for speed). But that is another story…